Lupin 2023

CBD: Assessing a nascent market

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A group of industry experts weigh in on some of the issues that confront retailers and suppliers involved in the CBD category.

“The readiness is all.” It’s hard to think of an emerging product category where retailers and suppliers have taken Hamlet’s admonition more seriously than CBD. As attitudes about cannabis, hemp and products derived from them have shifted, and the legal and regulatory restrictions around them have started to unravel, many chains and an extensive roster of vendors are busy laying the groundwork for mass market distribution of products that contain CBD.

A nonpsychoactive component of cannabis plants, CBD, or cannabidiol, interacts with the body’s endocannabinoid system, which regulates such things as appetite, weight, sleep, pain, inflammation and mental state. Advocates assert that CBD has a positive impact on all those functions, as well as delivering beauty benefits when included in skin care products and cosmetics. In addition, cannabidiol is sometimes used as an ingredient in food, beverages and nutritional supplements.

Retailers in the U.S. are eager to give their customers access to CBD-based products, which come in a variety of forms, and cash in on what is projected to be a multibillion-dollar business. Some chains with stores in jurisdictions where recreational use of marijuana is legal, including Bartell Drugs in Washington state, are already selling CBD items, a strategy that has also been adopted on a selective basis by at least one national player.

Despite almost universal interest, most retailers have chosen to hold their fire for the moment because of lingering questions about where the legal fault lines lie. One major hurdle was cleared last December when President Trump signed the $867 billion Agriculture Improvement Act, which, among many other things, opened the door to large-scale cultivation of hemp. Those who hoped that passage of the so-called Farm Bill would remove all obstacles to getting CBD products on the market were disappointed when, shortly after the legislation was enacted, Food and Drug Administration Commissioner Scott Gottlieb issued a statement asserting the agency’s regulatory authority: “We treat products containing cannabis or cannabis-derived compounds as we do any other FDA-regulated products — meaning they’re subject to the same authorities and requirements as FDA-regulated products containing any other substance. This is true regardless of the substance, including whether the substance is derived from a plant that is classified as hemp under the Agriculture Improvement Act.”

All that, together with a number of scientific questions that have yet to be definitively answered, adds up to a category surrounded by an unsettling degree of uncertainty. In an effort to shed light on some of those issues and what retailers interested in entering the CBD business need to know, Chain Drug Review sponsored a roundtable at the recent ECRM Hemp/CBD Health & Beauty Care EPPS in Chicago. The session, which provided the basis for much of the coverage in this section, began with a comprehensive overview of the category by Dave Donnan, senior partner at consulting firm A.T. Kearney. In the discussion that followed, he was joined by Dave Janowicz, vice president of merchandising and retail operations at the Pharmaca drug chain; three representatives of the supplier community — Dr. Karyemaitre Aliffe, a consultant to Charlotte’s Web; Kaley Nichol, cofounder and chief operating officer of Sagely Naturals; and Vincent Porpiglia, president of Hero Brands, internal sales arm of Select CBD — and Chain Drug Review editorial director Jeffrey Woldt. 

WOLDT: I’d like to begin by asking the suppliers on the panel to talk about the variety of products that are on the market, and how they narrowed the field down and decided what to concentrate on.

Kaley Nichol,
cofounder and chief operating officer, Sagely Naturals

NICHOL: I’ll jump right in. It’s working. Sagely Naturals started specializing in topicals because we felt topicals were the most approachable to someone who’d never used cannabis before. We ventured into dietary supplements as our customers kept saying, “We want to incorporate it into our vitamin routine.” Hence, we started making dietary supplements. Since the Farm Bill of 2018 came out, the FDA [Food and Drug Administration] has made comments about making pathways to have CBD exist as a drug as well as a dietary supplement. I think that’s the gray area that Dave spoke of. That is yet to be determined.

What is no longer a gray area is CBD being removed from the Controlled Substances Act. No fear of the DEA [Drug Enforcement Administration] coming into your store and taking product. That was cleared up with the Farm Bill of 2018, but there does exist some gray area with dietary supplements. Our view is that we will charge forward and continue to make dietary supplements, because we believe strongly that given where dietary supplements are with CBD, there would be a public uproar if CBD were taken out of the marketplace for people who are using it for general well-being, and we feel strongly that that is the way CBD will exist in the market as a drug as well as a dietary supplement.

PORPIGLIA: I agree with the majority of what you said. We started in states like Oregon that have defined hemp rules and laws. For instance, pretty much every single batch of CBD products that we bring in gets tested for THC, metals, pesticides. That’s really important to us, but then as the overarching FDA is coming in, they haven’t classified it yet. So even though they said, “Hey, we haven’t ruled on this yet and we’re going to opine on it,” you should take caution within dietary supplements until they do rule on it. That’s the stance we’re taking right now as well.

ALIFFE: My work is primarily in the science and medicine of cannabis. A couple of things that can be helpful to clarify: Cannabis is a little bit different from dietary supplements in one aspect: By the time a dietary supplement makes it to your store — for those of you that represent large stores — it has gone through a fair amount of vetting. You’re choosing the brand that has already worked the best and that is selling the best, that sort of thing. And the regulatory issues have already been circumvented, OK? With cannabis you’re kind of in the middle, as that slide showed.

Another point: The FDA is more legal than science, so it’s more about words than data. If you’re not very careful with your words you can mislead yourself and also your entire company. CBD — just be technical for a minute — CBD is a molecule. It is a chemical; it is not a plant extract. It is not a plant; it is a molecule. People often refer to it as, “Well, this is a CBD product.” Think of CBD like caffeine. Do you talk about you know coffee, latte, espresso as caffeine? “I’m going to go get some caffeine. I just took 100 milligrams of caffeine.” You never say that, but you are doing it.

If Starbucks or whoever else — hopefully they’re not anyone’s competitors so I don’t sound brand loyal; I don’t even drink coffee — were to present their product as promoting wakefulness and cognitive enhancement with a guaranteed delivery of 100 milligrams of caffeine per serving, then it would move from being a beverage to being a dietary supplement. There’d be more FDA scrutiny. This is all just a matter of words because everybody knows that there is caffeine in it. Myself as a coffee novice, I assume that espresso is the strongest coffee.

If I want to take a shot of coffee to stay up all night — usually I’m too hyper to go to sleep and I don’t need it — but if I were to take a shot of coffee, I would think espresso has the most caffeine. But if you go to the Starbucks website, American coffee has more caffeine than the espresso but it also is larger, so that’s part of the difference. Caffeine is a component in coffee, like CBD is a component in cannabis. And in fact, the two are very, very similar. If you really want to understand cannabis, I encourage you to pay more attention to coffee than you do to pot, because coffee is a psychotropic medicinal plant that just has a different regulatory space around it.

So when people say that they’re giving you CBD, they’re saying they’re giving you a molecule. That molecule is regulated as a drug by the FDA. So the gentleman over here had a question. With respect to that, when you have oil from hemp, it will be higher in CBD than in THC, but as long as you’re not talking about the CBD, it is hemp. Just like with coffee. As long as you’re not talking about it, as soon as you start to have energy drinks or whatever — Red Bull and all those things — and they’re promoting the caffeine content, that’s different. If you are buying or selling pure caffeine and transporting it across state lines, that is regulated differently than coffee. That’s what I mean by the legalese around it, but kids snorting caffeine can overdose. People add extra caffeine to their Red Bull. They can have heart attacks. It’s as intense as cocaine. There are some decent reasons around that.

DONNAN: I was just going to say that, in fact, in Europe right now you cannot have CBD in your drinks or whatever. It’s all called hemp. I had several different drinks that were provided to us at the cannabis conclave, and it was all hemp. Hemp lemonade, hemp water, and they just couldn’t use the term CBD because of the food regulations in Europe.

WOLDT: Dave, as a retailer, how are you trying to sort through all of these different terms and the imprecise use of them?

Dave Janowicz,
vice president of merchandising and retail operations, Pharmaca

JANOWICZ: OK. How many retailers are in the room? Sitting up here I feel the same thing you guys do, and I have for a while. For Pharmaca, we have 30 stores, including e-commerce. We’ve seen the same thing and sit in between — very well said — technical expertise from the vendor side and the FDA/DEA statements and legalities that put the retailer in the middle right now. I view us as being in the gray area, because the Farm Bill was one big step that took oversight away from the DEA, but then the FDA comes right behind it with the comments that they have made. As a retailer right now we’re sort of racing to the start line, but not going across it yet. We’re working with our team to start talking about what we want from the vendors. What kind of information do we need? And it’s going to be really important for the vendor community when we start calling on the category managers and the buyers to make sure that we have a lot of good, solid education. Education that you can pass along, very simple education that I call “digestible education” that can be passed on to the team members and on to the customer.

We’re doing everything we can to get ready so that once we feel comfortable we can run very quickly. Everyone realizes the size of the potential prize here, so we’ve already gone through a space allocation process in every one of our stores so everyone knows where it’s going to go. Our category management team is vetting through what questions to ask, because, from a category management perspective, it’s not like you’re the shampoo buyer and it’s a new brand of shampoo. For the category management teams, this is new to them too, so they’re having to educate themselves on what questions to ask and then working with my team to stay true to who we are and our model and ask the same questions we would have for any other supplier, make sure that they understand their products when they’re answering us back. And if they don’t know the source of products, the level of THC, the certain types of questions that we ask, then it’s probably not the one we want to step out for.

The last thing we’re thinking about is that there’s a level of risk here, right? We’re in this black-and-white or gray area. There are a lot of retailers out there now that have jumped ahead, trying to get a jump on everybody, betting that the FDA is going to go a certain way and that there is really not a lot of risk. Smaller retailers like us are waiting to see if the FDA will clarify their stance a little bit more before we decide to take that jump and take that risk on, if there is any. So from our point of view, we’re doing everything we can as quickly as we can to be ready, and if something happened tomorrow, we’re ready to go.

WOLDT: What would it take to make Pharmaca decide it’s ready to go? Do you need clarification from the FDA?

JANOWICZ: I think that’s what we’re waiting for. The next step is to get a little bit more comfort with where the FDA is positioning itself.

NICHOL: To speak to the other retailers that we’re selling to and we’re planning to launch with, the conservative stance is to move forward with the topicals but not necessarily dietary supplements at this time, and to look for brands that aren’t making medical claims. That’s where the FDA really has a problem with brands — where they’re saying, “This cures cancer. This is for epilepsy.” That’s a big no-no. The fine line for us is how to educate a consumer on what this product is for and at the same time not make those claims. But as a retailer, I’d really be looking at what it says on the package and what is it claiming to do. The conservative retailers that are moving forward are skewing toward topicals and brands that certainly aren’t making claims. I just wanted to say that.

ALIFFE: Yes, I would like to suggest and even strongly advise to any retailers, especially large retailers, entities that have a brand presence, that whatever the shopper’s experience is, it reflects on your brand, even before it reflects just some small item in there that nobody remembers the name of. So I would suggest that you have an advisory panel, basically a regulatory team; it wouldn’t take any more than, say, three people that know the science, that know the regulatory aspect, that understand the labeling guidelines as an internal team. And part of that function would also be to enable QA/QC — especially the major products that you’re bringing in, where you’re making a major investment. There’s a huge warehouse wherever that you’re bringing things in from. You don’t want that to ever be shut down.

The FDA has a history of shutting people down in the botanical space. I’ve worked in that space for over 30 years. People will ship some plant, maybe it’s something that’s as harmless as echinacea from China, and it comes in on a big container ship and it arrives in LA, and for whatever reason usually not even explained, the DA and FDA says it has to sit there until the paperwork is done. And it’s July and it’s a botanical, and by the time the paperwork is done, that botanical no longer has the same potency that it had ­before.

You don’t want your brand to depend on someone else’s shell game. It’s very easy with cannabis to take a fingerprint — batch by batch — of the material that not only they provide but also you do. Not just through a third party, because the third-party labs have been shown in several states to be very compliant in providing data that they think the client wants. Are you looking for a high THC or are you looking for a low THC? So there’s a lot of variability, and you don’t want your brand to depend on those sort of human vagaries.

WOLDT: It seems the FDA is being painted as a villain and, as a consumer, I don’t feel that way. I like the FDA. I want them out there. I want them to say, “This product is OK.”

Dr. Karyemaitre Aliffe,
consultant, Charlotte’s Web

ALIFFE: I wouldn’t say that the FDA is a villain. There is one key: perspective. I like to paint pictures in perspective. One big difference with cannabis is that it is the reverse — if you will, topsy-turvy — of the usual process by which something arrives to market. What’s the path to market? Something that’s medicinal has a path to market that — referring to pharmaceuticals, for instance — starts with a lab, a pharmaceutical company, clinical trials, the FDA, and then a physician recommends to you a product that you’ve never heard of before, you have no idea what it does and you assume that it will work.

So it’s very top down, whereas with cannabis a good 80%-plus of people already know what it does. They are already informed, and the consumers are more informed than the physicians. You can wait for pharmaceutical companies to do trials, but you don’t really need to, because an individual experience may be anecdotal, but if you take big data and process it, anecdote is actually more powerful than a clinical trial, because you’re actually looking at real-time users. The challenge is who is going to step in either from the industry side or whatever to manage that regulatory space so we can be self-regulating prior to being shut down, if you will, in many ways by the FDA, because the FDA is pharmaceutical oriented. And so there will be a greater opportunity in the product space from the bottom up version than top down.

WOLDT: Dave, before the panel you and I were talking about the fact that research on medical marijuana is more advanced in other countries than it is here.

DONNAN: The big gap in the U.S. is that we’ve got 70 years of prohibition and no research. No research universities have looked at the product in any great depth. In the last 50 years, Israel has been looking at cannabis in great depth for mental acuity, looking at disease control, and Canada for the last 10 years. And so some of the clinical trials are going on outside of the U.S. Part of it is going to be understanding how we bring that into the U.S. and have the U.S. catch up. Although hemp is legal, cannabis is still a Schedule I under the Controlled Substances Act. There is no legal research that can be done with it. And so until we can break that log jam, we’re always going to be anecdotal — what our mother-in-law or her friend said after using it.

JANOWICZ: One other thing from the retailer’s point of view that makes it a little bit difficult right now is that I’ve talked to a number of different vendors over the past year or so, whether it’s at NACDS or some other trade shows, and everyone has a belief that their product is good to go: “You can sell this. It’s good to go. We are complying with everything.” If I would have gone back to a year ago and reviewed everyone that told me, “Yep, you’re clear to sell this. It’s compliant, and we meet all the regulations,” they were really not based on things that have happened over the last few months. It’s taken a lot of steps, but it puts the retailer in this tough middle area, because you’ve got a lot of great information coming from the medical community, you’ve got a lot of great information coming from the vendors, yet at the end of the day the retailer has got to decide, “All right, can I do this or not?” And right now most are taking a little bit of a cautious approach because we don’t really know what to do.

Vincent Porpiglia,
president, Hero Brands, sales arm of Select CBD

PORPIGLIA: You’ll see brands doing a lot of that research too. We’re in the process of doing different double-blind clinicals around CBD and the different benefits and effects. We see the value in having the ability to make those claims, and so we’re investing in things like that as well.

ALIFFE: It’s 2019, about 30 years since I finished training at Stanford in medicine and clinical pharmacology. In that time period, the American public has become a lot more sciencey. There are Fitbits, there are TV shows like “CSI” and “Star Trek,” and people are able to spout off technobabble a lot. And it’s kind of a shock to me, because people will say words like “bioavailability” and I assume they must know what it means. Like when people say “market share”; I can see market share, but I don’t know what it really means. And so, if you’ll allow me a couple of moments that I think it will take to dispel something, cannabis does not need clinical trials. Absolutely not, because it’s a substance of anecdotal medicinal use. The reason for clinical trials is you don’t know what to do with something — when it’s a molecule that you invented in the lab and you don’t know what it does to people because no one has ever used it.

I won’t go through all the phases of clinical trials; there’s Phase 0, 1, 2, 3, 4, all of these different phases. But basically cannabis is already a late Phase 2/Phase 3 drug, meaning that we already know that it works. We already know that there is a wide dosage range that’s fairly safe because some people just take one puff and rap stars smoke a pound of weed.

WOLDT: Fairly safe?

ALIFFE: But you have to understand that pharmaceuticals are not that safe. What I’m saying is that you go into that Phase 1 trial and you give a certain dose to 10 people or to five people and you ask, What is the effect? Does their liver shut down? Does their kidney shut down? Do they vomit? Do they have all these problems that nobody wants to hear me go into? You already have enough use so that you would statistically have detected this problem if it was causing hemolytic uremic syndrome or all these different other problems.

The clinical trial is useful for a specific medical application like Stage 2 HER+ breast carcinoma and so on — the sort of thing for which you can make a medical claim. But if you’re not making a medical claim, in the way that coffee is not making the medical claim, then it doesn’t matter. How many of you know how much caffeine it takes for you to stay up when you haven’t finished by 8 p.m. a presentation that you need for 9 a.m. tomorrow? Do you really know?

If you do, it’s anecdotal. You might know exactly, but it’s anecdotal. It’s personal. Cannabis is the same way. Forget the world of physicians being able to tell people, “Hey, if you’re having borderline anxiety, what you need is about 10 milligrams of CBD and you’ll be fine and just take it twice a day before you go to bed and first thing in the morning.” That’s not it. The endocannabinoid system doesn’t work that way. The cannabinoids don’t work that way, and medicine is moving in a personalized direction anyway. The real opportunity is in the big data, where you’re capturing real people. Fitbit knows how many people are running all around Chicago or all around the world and what their heart rates are and all these things, and you find the clusters within that data, but it’s generally useful. And if you haven’t made a claim that you have met the Hippocratic Oath of “First, Do No Harm,” you’re not going to harm anyone by allowing them to buy a CBD/hemp product.

WOLDT: Dosing is an interesting issue. I talked to someone else who was supposed to be on the panel this evening — unfortunately, he wasn’t able to make it because of the inclement weather — who has a very different view. He thinks dosing instructions are important. I would have loved to hear you two exchange viewpoints.

NICHOL: Another big consideration is the FDA and drugs and obviously the opioid epidemic: 61% of people who are in pain are on prescription medication. And so I think this industry is just right for something like CBD, and I think we’re at an incredible crossroads right now with CBD being a potentially great answer for people looking for natural alternatives. That’s what excites me about our brand — and I’m sure other brands — being able to offer that. Unfortunately, I think that regulation is going to
be slower than we’d like, but it’s the bottom of the first inning for CBD as a potential takeover of an industry that’s really ripe for disruption.

PORPIGLIA: A lot of this also boils down not just to the FDA but also to the states. I mean, marijuana is illegal federally, but think about how many states are actually allowing the sale of marijuana right now. And with CBD you can also fall into a similar structure until the FDA and the government end up making a final decision on that.

WOLDT: Let’s assume that when CBD hits the mass market, sales will take off. How are you going to source the ingredient and make sure that there is an adequate supply to make the products you’re talking about, and also maintain quality?

PORPIGLIA: No. 1, I think the 2018 Farm Bill was pivotal in doing that because now it will allow additional states to grow. And from that I think a lot of other states have to follow — states like Oregon, Kentucky, Colorado, where they have regulated hemp programs where it’s seed-to-sale type of tracking. They’re testing every lot and batch to make sure there’s no THC, or certain levels of THC, no metals, no pesticides. And as more people do that, it will ensure that the quality and the source are really clean, which is important to the end-consumer because we want the end-consumer to benefit and not have any issues. The more we can have states develop programs like that, the better it will be for the industry.

Dave Donnan,
senior partner,
A.T. Kearney

DONNAN: Yes, one of the things about hemp is that because it hasn’t been legal there haven’t been as many hemp farmers. Hemp is an agriculture product, and farmers know how to grow it; however, it’s not as easy to grow as some other things. It’s very susceptible to molds and funguses. And so there is a worry that as we ramp up production a lot of people are going to get into hemp farming, because it’s more lucrative than growing soybeans or corn but, at the same time, there’s maybe going to be overuse of herbicides, pesticides and fungicides. And as we grow it, what level of CBD is coming out of those plants? Because if it’s the first time it’s being grown it may take 12, 18, 24 months for a farmer to get it right to come up with a hemp that has the right level of CBD, and that is moderated with the amount of herbicide, pesticide, fungicides that are being used.

And so you’ve got a demand coming out and you’ve got a limited supply. Where is the oil going to come from? That’s one of the worries that we have as a firm, and what we recommend to our clients is to make sure they’ve got assured quality supply of their product, because — guess who is the biggest CBD oil producer in the world? China. Second-largest producer? Eastern Europe. I think we’re pretty safe here. But American-grown hemp is going to be in short supply for probably the next 24 months, and until then you need to ensure you’ve got good-quality supply.

WOLDT: There are a lot of retailers in the room who are trying to figure out how to handle the category. Dave, what are the things that you look for when you talk to a CBD supplier?

JANOWICZ: There are a couple of things that our teams do, and all of your teams, I’m sure, would do something similar. When you talk to the vendor rep that’s pitching you the product, do they really know what the background is and what the supply chain is? And if you start to ask them questions and they don’t know, that’s usually a flag that goes up and says, “I’m going to hold on this one.” One of the things that we’ve been talking about as a team in Pharmaca — because Pharmaca’s model is typically more natural, more organic types of products — is to stay true to who we are. Ask about the known harmful ingredients. Are these products going to contain some things that we would normally stay away from? Our customer expects that from us. We need to stay true to our model and vet out those products that might have some ingredients that we typically wouldn’t carry. And that’s going to hold true for the CBD products as well.

One other thing that’s going to be a little different — and maybe it’s not so different, depending on the category — when this does launch and it does take off is that typically you’re going to be calling on multiple category managers for each company because there are supplements, topicals and maybe edibles. You’re probably dealing with three or four different category managers within each company that you visit, and they’re all going to ask similar questions.

ALIFFE: One quick thing just to add on to what he was saying: A way of conceptualizing that is that some larger stores may have a pharmacy component within the store and that pharmacy component has to make certain decisions about carrying the brand name drug versus the generic. And when you bring in a generic, even though it has all the certifications and all that, if you don’t have a team in that space that is vetting those certificates, then you end up with a product that may cause problems that then reflect on your brand. It is harmful to your consumers. I say all of that just to say, kind of how Jeff Bezos says, that I’m very much on the side of the consumer. I want that person to be happy. I want all of your customers to be happy. In order to do that, you need to make sure that what is coming in is really what it says it is.

And so there’ll be a product in the Pharmaca space, for instance, and somebody says they have a better product. They did a little test somewhere. They have a lower price point, that sort of thing. They want to take over their shelf space. As soon as you bring in a product — at least in my mind as a consumer that shops at some of the stores that you have — it’s like bringing in your own white label Tylenol product, your own white label cough remedy. You’re buying a bunch of generic ingredients. Somebody’s formulating it for you, putting it in there. You can’t just take their word for it. I guess you could, but now it has your store’s name there. And so it really looks like you told them to trust this — and if it fails, you failed. So every cannabis product that you bring in, especially when you start to look at some of the generic advantages and shipping from Eastern Europe or from wherever else, think of it in that way.

JANOWICZ: That’s a very good point. One of the things that we’re starting to think through is that our customers look to us as being the trusted resource and, as new as all of this is to us, it’s going to be way newer for every customer coming into our doors, and they’re going to have a lot of questions. Our team is thinking through where we want to start and what we want to start with. Do we start with trusted brands that we already know and that are established, or with a brand that comes in that has really buttoned up and has a lot of good education behind it, can get out in the stores, can talk to the store teams and really help them understand it? I think there’s a potential when this goes out to market for there to be a product spectrum that ranges from wild to very sophisticated. And there is the potential to have some things that may be a little gimmicky or have certain claims or certain products associated with them that you might not understand. So we’ll probably take a more conservative approach to those types of items at first, just so we learn as a team as things progress and different products are developed. It’s going to be challenging for a while for everyone to understand what to stay away from and what not to.

ALIFFE: Sure. One key example is when your customers come in the door and they’re holding a product that says hemp or says CBD and they’re not thinking that it has any THC in it at all. And some of those people may be firemen or work in some industry where they get drug tested and they’re trusting you with the label that’s there. I don’t know how all that works, but if it was my store and I own a Costco or something, I would have a little rubber stamp when they come in that says, “THC free” or “Urine Test Negative” or something like that, because that’s a devastating issue for somebody to no longer be able to work in the fire force after 15 years because they had one positive urine screen after they used some topical or some oral or something that they thought they could trust because they’ve been shopping at your store for 10 years. That’s that point. You want to be that clean, because usually your firewall has been your pharmacy. Now this is walking straight in to the shelf.

WOLDT: Dave, what advice would you give a mass market retailer about when and how to get into the CBD category?

DONNAN: It’s all going to depend on what you’re going to say the product does. As I said, you’re seeing in Europe now that they’re downplaying CBD and just referring to it as a hemp product and relying on consumers to do their own research and do their own information and not putting any type of medical benefit on the product, offering it in beverage form, topical form or whatever. And consumers do their own research and understand it, and then they try it from there, but I think that until such time as we get a clearer definition by the FDA it’s going to be difficult. And like any other supplement, what type of clinical medical types of benefits can you put to the product without getting into trouble with the law?

ALIFFE: I think the products will sell themselves, and so the main thing is to first do no harm. Make sure that whatever walks out of your store with a consumer is not going to harm that person. Everything that is a good product will work. How well will it work? Will that coffee definitely keep everyone up for their board exams, for their bar exams? Not necessarily, but it doesn’t mean that the coffee failed; it just means it was that person’s perception. But if there are no claims and no promises, then it’s caveat emptor. It’s up to that individual to understand their relationship with coffee, with CBD, with CBD oil. That to me is not a big burden to put on an individual. If people can manage their caffeine, they can manage their CBD.

PORPIGLIA: Just to add to that point a little bit. I think you said it’s not necessary to have any tests or clinicals, but I think that it is helpful for brands to clarify this, especially for certain consumers that aren’t as educated as maybe we all are in this room. I mean, you could look at different skin care companies or hair care companies that do the same thing, and it’s just to help clarify to consumers and make it easier for them to make a decision. So again, we don’t have to make claims right now, but I think that over an extended period of time the industry will want to have some additional research so people have the understanding, not just on the dosage form but also how it could specifically benefit them. I do think it is useful, and I think that as a brand we’re willing to invest in that, because we want to give the best possible information and education to the consumer.

ALIFFE: Yes, it is definitely useful. I just said it is not necessary. The point is that it doesn’t need to prevent people from going to market. It doesn’t need to prevent people from consuming. Science is a product of culture. In this culture, people like to be right. In order to be right, you have to prove it, and that requires science. And so if you want to tell your mother-in-law that she will be able to decrease her anxiety just as well with cannabis as with these Valiums and there is no extra risk that you have associated with Valium, that requires a certain level of proof.

If you have a big enough family, you may have enough people to have anecdotal proof, because that’s how people get persuaded. Doctors get persuaded at doctors’ conferences by other doctors who are opinion leaders. They don’t do the clinical trial, and much of the time they don’t read the literature. It’s peer approval. We’re humans. We’re all kind of functioning in that same space, but if we want to be able to really nail something, we say, “This will work for you. You’ll love this Thai restaurant that I just found.” I mean, that’s part of this culture, but we really don’t know. The science is necessary to prove that, but ultimately it never proves that, because unless the product was tested on you today, it’s still taken on faith because there’s still a gray space around that. There could be a slight variation. You can have a little virus that’s changing your metabolism of the drug. You might have just taken some new pharmaceuticals that are changing these other things.

I trained in anesthesia. We give all of our patients our drugs ourselves. There is a prescription, an injection, and it happens right now, and there is a monitor. I’m very OCD/exigent: This is the dose. I know how much they took. I’m not judging it based on the last patient. They needed this much because they needed the heart rate to go down and they needed to go to sleep, but when you take something home, that is a different context. To me, it is a little bit hand waving, as they call it in science, to try and tell somebody this dose works for you, because it’s a population curve and they don’t know where you are on that curve. You might be weird like me or you might be on his side and weird like him. There is no guarantee that you’re normal like him.

NICHOL: I just want to get back to the question about retailers and when and how. Unfortunately, as a brand, I can’t answer that for you or I would recommend you launch now with CBD, of course, but that’s a matter of your risk tolerance. I think of how to launch, and I think there are a few things that are really key to success. First and foremost, it’s education, which I truly believe needs to come from the brand. That’s how we interact with your buying team, and that’s how we plan to interact with your sales staff and your customer. That’s at-the-shelf education. Second would be merchandising. Expect to invest in merchandising, and expect to invest in what that CBD end-cap looks like, because where I’ve seen the most success is really at an end-cap level. And then use digital, use your consumer that you’re reaching via email or your digital presence to really talk to and educate them about CBD. Then last would be assortment. I think you need to have a mix of price, potency and applications to have a competitive assortment for your consumer. If you are thinking about actually launching, those are the things that you really need to think about as a retailer.

PORPIGLIA: Just to add to that. Something that we do with a good majority of the retailers that we launch with is invest in in-store education, and it’s basically just about the products, how to use them, how CBD may help you — not making any claims, very supplement-esque. It may help you with this, it may help you with that, and, again, that firsthand education and knowledge you can give to customers is what will keep them coming back and trust in your store, because you’re helping inform them, and then, especially if it works for them, they really trust you.

JANOWICZ: I can probably finish that off from the retailer’s point of view. Have a plan. Know what you want to do. Think it through. Where is it going to go? What do I want the customer to see when they come through the front door? How do I want them to view this? Where do I want them to see it? I would say, Think about security. There’s a high element of theft with some of these products, so you need to think about your locations and whether they go under glass or not. Talk to your team, make sure everyone is on the same page as far as which questions to ask, how to talk to the suppliers and ask the information from them, whether it’s education based or merchandising based.

Then finally — and I’d say this has really helped me — do the research every day. Just about very day, whether it’s from Chain Drug Review or different articles or magazines out there, there are at least two or three links that are CBD-related. Click on them. Read through them. Every day there is a new slant, there’s a new take on things. I would say that every day invest the time to click on those links and read through to keep yourself up to date as well.

WOLDT: Thank you. In the remaining time, we’ll take one or two questions from the audience.

AUDIENCE: I’m really glad to see how everyone is treating this new emerging field so responsibly; that’s really heartening. I actually walked into a dispensary out West on the discovery tour and I saw this bud tender who was basically looking at the products, and I thought, Not only would the FDA come in and shut down these companies for selling these products, but they would probably throw this guy in jail for diagnosing medicine without a license. My question is, Have any of you thought of this in a much more forward-looking context as the first active ingredient essentially for psychotropic medicines that are going to become much more commonly used by consumers?

I mean, if you’re out in California, you’re seeing hallucinogenic mushrooms, you’re seeing the rise of psychotropic medicines on the shelf being mixed up in people’s kitchens and so forth. We need to talk about cannabidiol and cannabinoids very specifically, because I see a lot of confusion. I’m a molecular biologist myself and a geneticist. I’m trained at least in the scientific mechanisms, but I think that we really need as an industry to be looking at this as the rise of psychotropic medicines and how we’re going to handle them in the retail space, because cannabidiol is just one ingredient out of the 270 cannabinoids. How are we going to handle the other 269? And then how are we going to handle all the others that are coming down the pipeline that the FDA will not have guidance for?

WOLDT: We’ll ask the MD on the panel.

ALIFFE: One thing I would do at the most simple level — and to underscore what David was saying, I would suggest any big store and especially a membership store like Costco; I just mentioned it because I’m a member — would be to have a down line of information if people are buying CBD products. Maybe it’s just for the first 18 months, just like the Geek Squad or something when people buy a computer. Because you don’t want them to freak out over this great purchase that they made. It’s the same thing in that CBD space. The primary issue with cannabis is that it’s psychotropic. The primary issue with psychotropics is cultural, because this culture has issues with psychotropics, but it wavers in this space. There is a plant called Salvia divinorum, which is legal. It is not scheduled at all, and it basically is a hallucinogen in the same space as peyote and mushrooms. It grows like mint in the garden, and teenagers grow it and smoke it and nobody even knows what’s going on.

At the same time, on the clinical academic side there’s a lot of work being done with psilocybin, DMT with ketamine, and other hallucinogens that are looking at their antidepressive spaces. That sort of work usually takes five, 10-plus years but, as I mentioned, because this is a bottom-up process — whether it’s in the illegal side or the legal side— a lot of people in the population are using products, so that produces a certain amount of data that is anecdotal, but sometimes that data makes it into academic and research spaces and then people pursue certain questions. The last piece is that cannabis is a plant that, as was mentioned, comprises over 500 distinct molecular species, while our pharmacology is designed for a single molecule. It does not have the mental capacity to handle 500 at the same time, and that is why I mentioned big data before, because once our science becomes as smart as Silicon Valley — which is what has led
to most of the recent medical advances, not the smart doctors but the smart machines — then you start to have the capacity to
handle this higher level of data with botanicals, which are more complex than pharmaceuticals. You have to be smarter to understand a botanical drug than to understand a pharmaceutical.

Acetaminophen is psychotropic. Tylenol is a CB1 agonist. It works like THC, and if you look in the medical literature, you can find where they say that it’s so similar to THC we don’t understand why it doesn’t get you high. It gets rid of anxiety. It blocks depression. It blocks a lot of the same functions, and it has a lot of the same effects as THC. We’re only going to start to see those things as we start to allow ourselves into that space. The last thing that I’d like to mention is cannabis, since psychotropics used to be illegal and immoral and now have been legalized. But they have yet to be moralized. Part of the challenge you’re going to face is that you’re the people that are putting up “Labor Day Sale, CBD products 25% off,” “Veterans Coming Home,” “Memorial Day, “Decrease your stress, have a better barbecue.” That puts an all-American face on there, whether the Super Bowl carries the commercial or not. Your stores are this heart of America.

Part of that moralization effect happens with brands. Part of it happens with retailers. Part of it happens with Christian ladies that are 55 years old that teach public school in Kansas. It happens in different spaces, but that’s the key thing, because people need to understand that there are a lot of psychotropics out there running around in that space that people are using all the time but we just don’t talk about it.

AUDIENCE: Retail buyers over the next two days are going to be meeting with CBD suppliers. What do you recommend as key questions they should be asking in those meetings?

JANOWICZ: I would ask the suppliers, What is the product positioning? What’s your strategy to go to market? What type of merchandising and what type of education do you have? Education is going to be a really big part of it. And then, what’s your plan for supply chain? What’s your plan for sourcing? Are there multiple categories you’re going to be getting into? For Pharmaca maybe it’s a little different, because we’ll ask questions about other ingredients that are in the products and where they’re sourced from.

WOLDT: When you say education, do you mean for the consumer or for your ­associates?

JANOWICZ: I think it’s both. The buyers are going to have to be educated, because this is new to them and they’re going to have to be able to pass that education down to the consumer, and that’s going to be in the form of materials that are on your displays — including end-caps or PDPs or some type of trifolds — that are simple enough that the typical consumer coming in who has a curiosity factor can pick them up and understand them. But it has to have enough information so that consumers are comfortable with it as well.

AUDIENCE: This question is mostly for Dave. You spoke a little bit about selecting suppliers that you can trust. And recently Remedy Review looked at 21 CBD products that are readily available on the market. Most of them passed, but four of them had negative results and two of them tested positive for pesticides. One had only one-tenth of the concentration of CBD that it claimed on the package. As a retailer, what type of testing are you requiring for products that you’re going to bring into your stores, and what do you like to see from your suppliers in terms of proactive test results that they can provide?

JANOWICZ: In terms of the CBD products category, I think retailers are trying to figure that out as well. What are the questions to ask if there are results out there or products out there that have had negative press or negative ingredients or whatever? That’s where the research comes in for the team to read up on different brands to see if there’s any of that out there. I know that for our team it’s really important that we try and vet through as much of that as we can. When there is something that comes up about a brand or something that appears on our shelves that ends up in the press because it has pesticides or some negative ingredient, our customers come directly to us and say, “Why are you putting this in my Pharmaca?” When we get that feedback, we’re really sensitive to it. A lot of times you don’t know till it happens. I think it’s more about how you react to it once it happens. If you find that you made a choice with a brand and there are some negative things that are going on with the brand, then I think it’s about how you react to it and whether you get out of it or you do something to change your course of action.

ALIFFE: One thing I would like to add to that is, again, to make things a little bit less complex: Think of cannabis like coffee or tea. Look how diversified the coffee space has become with cold brew, and there are all these sorts of things, but it’s the same question. Where do the beans come from? With any botanical product, including your spinach in the produce section, there is a certain amount of data. All the data that you mentioned should be covered for all of that category. So for green, macha tea from Japan that may have come from Korea and may have been bused over from China or whatever, you want to have some sort of a firewall that’s there, but basically those questions are the same standard questions that you need for any botanical.

JANOWICZ: And just to add to that, one of the things that we do is look for transparency in the supply chain. The questions that our team would ask would be, Where are your ingredients coming from? What type of quality control measures do you have in place? Can I go tour the facility if there is a question? That transparency in supply chain for us is really important, and if you start to ask those kinds of questions about where your ingredients come from and where they are sourced from and you don’t get the answer or the supplier doesn’t really know, that’s another flag that comes up that says you might want to hold off on this one.

PORPIGLIA: Just something to add to the transparency point for customers: What we’re trying to do is to ensure that every single lot will have a QR code that’ll take you directly to the test results, which is done by a third-party lab. Our goal here is just to make everyone as comfortable as possible, because we want to see this on every store’s shelves, and we want everyone to buy it. We’re doing everything we can to make that happen. That’s one thing — the transparency and the testing.


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